Silver Market Update

Silver did as predicted in the last update, dropping back towards $10 from
the then price at $11.50. It got down to about $10.20 and then bounced. Now
it is clearly rounding over beneath a small Dome distribution pattern, marking
out what looks like a small Head-and-Shoulders top. Thus, we can expect a retest
of the support in the $10.20 area soon, and should this fail then silver is
likely to drop back to the next significant support level near last year's
lows in the $8.50 - $9.00 area. While the earlier breakout from the severe
downtrend and above the 50-day moving average were important technical developments
that retain longer-term bullish implications, the falling 200-day moving average
still a long way overhead means that it would appropriate for silver to drop
back here and do more base building as preparation for a more determined advance
later.

Should silver break below $10 soon and head back towards last year's lows,
it can be expected to synchronize with gold dropping back to the $750 area
to mark out a symmetrical Right Shoulder that matches the Left Shoulder low
of last September of a large Head-and-Shoulders bottom pattern that is also
evident on the charts of Barrick Gold, Goldcorp, Kinross and other large golds
that promises a major advance by the sector as the year progresses.

The 1-year silver to gold chart is interesting as it shows that after a period
of severe underperformance by silver last year, its performance has matched
gold overall since October, and the rising trend of the MACD indicator suggests
that a period of outperformance by silver probably lies ahead, most likely
on the next advance by both. This is also strongly suggested by the charts
of various quality silver juniors, which are looking very bullish, and have
been the subject of considerable attention on the site in the recent past.
We took profits in several which rose substantially on the back of the recent
silver rally, the chart for the best performer, Minco Silver, is shown below.
We bought Minco
on 5th December and sold
it again on 4th January, more than tripling our money in a few weeks. Minco
remains an attractive investment which will be be looking to re-enter if it
reacts further.

The above represents the opinion and analysis of Mr. Maund,
based on data available to him, at the time of writing. Mr. Maunds opinions
are his own, and are not a recommendation or an offer to buy or sell securities.
No responsibility can be accepted for losses that may result as a consequence
of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation
of any kind from any groups, individuals or corporations mentioned in his reports.
As trading and investing in any financial markets may involve serious risk
of loss, Mr. Maund recommends that you consult with a qualified investment
advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction
and do your own due diligence and research when making any kind of a transaction
with financial ramifications.